Housing market shrinks again

Home sales in June were the lowest since the property crash began, show the latest figures from the Statistics Institute (INE).

There were 24,699 home sales in June (excluding social housing), down 26pc on the same time last year, below even June 2009, when the crash was thought to be at its nadir. The graph above makes it clear that, after a deceptively promising start, 2011 (in red) is turning out to be the worst year yet.

Compared to June 2007, sales were down 60pc – a teeth-jarring fall by any measure.

Year-to-date, transactions are down 11pc compared to last year, 3pc compared to 2009, and 55pc compared to 2007, as illustrated by this table.

On an annualised basis, sales have fallen in 10 of the last 12 months.

Assuming that prices have fallen by an average of 30pc since 2007, then in value terms (Euros) the market has shrunk by 70pc since then. That means 70pc less money around for everyone who lived off the housing market, town halls in particular.

All this helps explain why many town halls are now in the jaws of a financial crisis: They ramped up their spending and overheads during the boom, assuming it would last for ever, but now the money has dried up and they can’t afford to pay their bills. A 70pc fall in revenues from real estate helps explain why.

Why are transactions still falling? Partly because the credit crunch is still in full swing – in Spain at least – and partly because the abolition of mortgage tax relief at the end of last year brought forward sales that might otherwise have taken place in the first half of this year. So the figures might make the market look worse than it actually is. To find out we will have to wait and see if there is a recovery in the second half of the year.

The following table summarises the key transaction data month-by-month for the last 5 years.



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About Mark Stücklin

Mark Stücklin is a Barcelona-based property market analyst and consultant, and author of the 'Spanish Property Doctor' column in the Sunday Times (2005 - 2008). He can be reached by email on ms@spanishpropertyinsight.com.